Course description

Financial Statement Analysis

Introduction

Financial analysts and consultants are employed in a wide range of different types of firms and organizations to offer advice, provide valuable information and help corporations in their investment, operational and financing decisions. In all these a common component and requirement is the ability to analyze the financial statements in order to determine a company's value, project future earnings and cash-flows, identify risks, spot opportunities for cost reduction and/or efficiency increase, understand the effects of tax, regulatory or policy changes and so on.

To this end the course examines the point of view of user of financial statements and caters to students who expect to use financial statements in their careers. The course aims at preparing the students to analyze and interpret financial statements in a financially meaningful way. For this reason the course teaches the relevant material by examining real company data. The course also gives student skills to use Bloomberg terminal to gather and analyze information.

We emphasize understanding what numbers in the various statements mean and how to think about performance cost of capital, and the various types of risks. The course covers the key topics of who demands financial statements, who supplies, where to find the critical information financial analyst would need in decision-making. We examine how to analyze cross section and time series of financial statements, how to construct various ratios, and how to develop statement-based performance measures. We focus on the fundamental issue of valuation and we study selected applications of the topic to the cost of capital estimation and risk management.

Course content

  • Introduction to financial statements and bookkeeping
  • Accrual-based versus cash-flow-based performance measures
  • The analytical income statement and balance sheet
  • Profitability analysis
  • Growth analysis
  • Liquidity risk analysis analysis
  • Forecasting
  • Valuation
  • Cost of Capital

Learning outcome knowledge

Upon successfully completing the course the student will

  • Understand the needs and the uses of financial statements,
  • Understand the need and the way to extract meaningful information by combining the different financial and accounting data,
  • Know the fundamental financial information that are required for the various types of decisions,
  • Know the required steps on how to perform a company valuation,
  • Know how to strategically analyze firms and interpret their financial statements.

Exam organisation

  • Written assignment: 20%
  • Written exam: 80%